Global Markets Sputter; Fertilizer Stocks Fall

123jump.com Staff
17 Jun, 2009
New York City

U.S. stocks struggled as the President Obama offered his plan to overhaul financial regulations. Ten healthy banks repaid $70 billion of funds to the U.S. government with interest. S&P lowered ratings on eighteen banks. Fertilizer stocks fall after K+S estimated lower international demand.

[R]4:00 PM New York, 9:00 PM London, 6:00 AM Sydney – U.S. stocks struggled as the President Obama offered his plan to overhaul financial regulations. Ten healthy banks repaid $70 billion of funds to the U.S. government with interest that they had said all along they did not need. S&P lowered ratings on eighteen banks. Fertilizer stocks fall after K+S production warning.[/R]

The U.S. President Obama unveiled a plan to reform financial system regulations that did not go as far most people expected. The proposed plan offers more powers to the Fed, assigns a new national regulator that will monitor system risk and eliminates the Office of Thrift Supervision.

The plan to increase Fed powers to regulate non-bank financial institutions and hedge funds is opposed by a many in the industry but is likely to gain traction with lawmakers as the President called for a final bill by the end of the year.

JP Morgan Chase, Morgan Stanley and Goldman Sachs are among ten healthy financial institutions that have repaid nearly $70 billion to the U.S. government. JP Morgan returned with interest $25 billon and Morgan Stanley and Goldman Sachs repaid $10 billion each.

The healthy ten banks were required to raise $75 billion after the stress test conducted about six weeks ago.

Separately, the rating agency S&P lowered its rating on eighteen banks as regulations tighten, the funding cost increase and more bank balance sheets are expected to be deleveraged. The rating cuts included Wells Fargo, Key Corp and Capital One Financial.

U.S. stocks edge lower after the release of consumer price index data. European markets tracked lower after the release of construction and UK unemployment data. E*Trade propose $1 billion of debt exchange and $400 million stock offering. FedEx estimates lower than expected first quarter earnings.

Watson Pharmaceuticals surges 5% after it agreed to pay $1.75 billion for Arrow Group. E*Trade plunges 15% after it proposed to raise $400 million in stock offering and $1 billion in debt. FedEx declined after it offered weaker than expected outlook for the fiscal first quarter.

European markets closed lower. Michelin plans to eliminate 2,900 positions in France. K+S lowered its outlook for the production and potash fertilizer prices for the second half. Aeroports de Paris completed Sfr 250 million bond offering.

UK unemployment edged up to 7.2% in three months to April and increased at a slower pace than expected. J. Sainsbury completed offering of £242 million stocks and £190 million bonds offering. Holidaybreak Plc to plans £31 million offering to acquire properties.

Stocks in Japan edged higher defying the decline in regional markets. Real estate stocks rallied on the expectations that recent tax break will spur housing demand. 20-year government bond auction drew more investors that expected.

Mumbai stocks in volatile trading fell sharply in the last hours of trading. The benchmark index opened lower on a weak trading sentiment in the U.S. and worries that local markets may be stretched. The advance payments of taxes for the first fiscal quarter were nearly unchanged from a year ago.

Australian stocks declined on weak U.S. industrial production data and general weakness in Asian markets trading. Australian leading economic index rebounded in April from March and home construction declined 4% in March. Asciano plunged after it increased its plan to raise more capital.

North American Markets

Dow Jones Industrial Average decreased 7.49 or 0.1% to a close of 8,497.18, S&P 500 Index decreased 1.26 or 0.1% to 910.71, and Nasdaq Composite Index edged higher 11.88 or 0.7% to close at 1,808.06. Toronto TSX Composite Index closed down 241.29 or 2.4% to 10,066.11.

Of the stocks in S&P 500 index, 244 increased, 251 declined and 5 were unchanged.

E*Trade Financial Corporation led the decliners in the S&P 500 index with a loss of 11.5% followed by losses in Marshall & Ilsley of 9%, in Prologis of 8.4%, in Genworth Financial of 8% and in Hess Corporation of 7.9%.

DeVry Inc led gainers in the S&P 500 index with a rise of 5.2% followed by gains in of Watson Pharmaceuticals of 4.9%, in St Jude Medical of 4.6% and Abercrombie & Fitch of 4.5%.

South American Markets Indexes

Mexico Bolsa Index decreased 73.89 or 0.3% to 24,150.94. Brazil Bovespa Stock Index dropped 159.94 or 0.3% to 51,045.84.

Argentina Merval Index decreased 3.3%, Chile Stock Market Select index lost 2.7%, Peru Lima General Index declined 2.4% and Colombia IGBC General Index increased 0.3%.

Europe Markets Review

In London FTSE 100 Index closed lower 50.11 or 1.16% to 4,278.46, in Paris CAC 40 Index decreased 52.81 or 1.64% to close at 3,161.14 and in Frankfurt DAX index declined 90.74 or 1.86% to close at 4,799.98. In Zurich trading SMI decreased 74.81 or 1.39% to close at 5,302.29.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 87.97 or 0.90% to 9,840.85, Hang Seng index in Hong Kong decreased 80.90 or 0.45% to 18,084.60, CSI 300 index in China increased 49.37 or 1.67% to 3,010.59. ASX 200 index in Australia decreased 58.40 or 1.47% to 3,904.10. The KL Composite index in Malaysia decreased 3.22 or 0.30% to 1,070.90.

The Kospi Index in South Korea decreased 7.98 or 0.57% to close at 1,391.17.SET index in Thailand closed lower 10.40 or 1.74% to 586.14 and JSE Index in Indonesia decreased 5.40 or 0.27% closed to 2,024.96. The Sensex index in India decreased 435.07 or 2.91% closed to 14,522.84.

Commodities, Metals, and Currencies

Crude oil increased $0.47 to close at $70.94 a barrel for a front month contract, natural gas increased 11 cent to $4.24 per mBtu and gasoline decreased 4.98 cents to 202.13 cents.

Wheat futures closed up 0.25 cents in Chicago trading to $5.66 a bushel. Sugar increased 0.17 cent in trading at 15.95 cents a pound. Soybean future closed up 21.50 cents to $10.50 a bushel.

Gold increased $7.30 in New York trading to close at $939.50 per ounce, silver closed up $0.19 to $14.32 per ounce and copper for the front month delivery increased 0.55 cents to $2.27 per pound.

Dollar edged lower against euro to $1.3950 and closed down against the Japanese yen to 95.65.

Yields on 10-year U.S. bonds increased to 3.68% and with 30-year maturities closed up at 4.51%.